Independent Auditor s Report

Transcription

1 Independent Auditor s Report 96

2 Independent Auditor s Report Independent auditor s report to the Hong Kong Tourism Board (Established under the Hong Kong Tourist Association Ordinance and reconstituted under the Hong Kong Tourist Association (Amendment) Ordinance 2001 and the Hong Kong Tourism Board Ordinance) Opinion We have audited the consolidated financial statements of the Hong Kong Tourism Board ( the Board ) and its subsidiary (together the Group ) set out on pages 99 to 136, which comprise the consolidated and the Board statements of financial position as at 31 March 2018, the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in reserves and the consolidated statement of cash flows for the year then ended and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Board and of the Group as at 31 March 2018 and of the Group s consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ) issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). Basis for opinion We conducted our audit in accordance with Hong Kong Standards on Auditing ( HKSAs ) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the HKICPA s Code of Ethics for Professional Accountants ( the Code ) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of the Board members for the consolidated financial statements The members of the Board are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA, and for such internal control as the members of the Board determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, the members of the Board are responsible for assessing the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the members of the Board either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. This report is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. 97

3 Auditor s responsibilities for the audit of the consolidated financial statements (continued) As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the members of the Board. Conclude on the appropriateness of the Board members use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong 17 August

4 Consolidated income statement for the year ended 31 March 2018 (Expressed in Hong Kong dollars) Note General Fund Principal source of income 3 Government subvention for the year 948,478, ,162,844 Other revenue Interest income 3,838,998 2,164,472 Realisation of deferred income - office premises 12 10,000,000 10,000,000 Sponsorships 53,148,914 31,565,765 Promotion and advertising income 13,999,561 13,950,509 Sundry income 36,425,389 27,943, ,412,862 85,624,699 Other net loss Loss on disposal of fixed assets (608) (7,755) Total income 1,065,891, ,779,788 Promotional, advertising and literature expenses 420,507, ,170,624 Research and product development 15,834,871 14,435,850 Local services and events 299,457, ,645,996 Staff costs 5(a) 255,254, ,722,438 Rent, rates and management fees 15,183,940 15,038,854 Depreciation 7(a) 16,306,318 15,267,061 Auditor s remuneration 501, ,670 Other operating expenses 35,652,772 26,947,075 Total expenditure 1,058,699, ,718,568 Surplus before tax for the year 5 7,192,022 16,061,220 Income tax 4 (39,803) (111,754) Surplus for the year 7,152,219 15,949,466 The notes on pages 105 to 136 form part of these financial statements. 99

5 Consolidated statement of comprehensive income for the year ended 31 March 2018 (Expressed in Hong Kong dollars) Note Surplus for the year 7,152,219 15,949,466 Other comprehensive income for the year: Item that will not be reclassified to the income statement: - Remeasurement of net defined benefit retirement plan asset 13(a)(v) 11,812,000 7,511,000 Total comprehensive income for the year 18,964,219 23,460,466 The notes on pages 105 to 136 form part of these financial statements. 100

6 Consolidated statement of financial position as at 31 March 2018 (Expressed in Hong Kong dollars) Note Non-current assets Fixed assets 7(a) 23,826,669 33,600,887 Defined benefit retirement plan asset 13(a)(i) 65,106,000 53,947,000 88,932,669 87,547,887 Current assets Debtors, deposits and payments in advance 9 22,045,992 19,749,962 Tax recoverable 17,049 - Deposits with banks and financial institutions ,968, ,324,095 Cash at banks and in hand 10 7,802,934 7,696, ,834, ,770,715 Current liabilities Receipts in advance 65,543,073 48,480,079 Accounts payable and accruals ,837, ,314,611 Deferred income 12 10,000,000 10,000,000 Current taxation - 101, ,380, ,895,871 Net current assets 134,454, ,874,844 Non-current liability Deferred income 12 1,666,667 11,666,667 NET ASSETS 221,720, ,756,064 Represented by: RESERVE General Fund ,720, ,756,064 Approved and authorised for issue on 17 August Anthony Lau Executive Director Dr Peter Lam, GBS Chairman of the Board The notes on pages 105 to 136 form part of these financial statements. 101

7 Statement of financial position as at 31 March 2018 (Expressed in Hong Kong dollars) Note Non-current assets Fixed assets 7(b) 23,812,459 33,582,347 Defined benefit retirement plan asset 13(a)(i) 65,106,000 53,947,000 Interests in a subsidiary 8 551, ,876 89,470,335 88,081,223 Current assets Debtors, deposits and payments in advance 9 21,615,434 19,127,887 Deposits with banks and financial institutions ,968, ,324,095 Cash at banks and in hand 10 7,600,135 7,522, ,184, ,974,931 Current liabilities Amount due to a subsidiary 8 2,361,977 2,411,969 Receipts in advance 65,543,073 48,480,079 Accounts payable and accruals ,373, ,750,375 Deferred income 12 10,000,000 10,000, ,278, ,642,423 Net current assets 133,905, ,332,508 Non-current liability Deferred income 12 1,666,667 11,666,667 NET ASSETS 221,709, ,747,064 Represented by: RESERVE General Fund ,709, ,747,064 Approved and authorised for issue on 17 August Anthony Lau Executive Director Dr Peter Lam, GBS Chairman of the Board The notes on pages 105 to 136 form part of these financial statements. 102

8 Consolidated statement of changes in reserves for the year ended 31 March 2018 (Expressed in Hong Kong dollars) Note General fund at the beginning of the year 202,756, ,295,598 Surplus for the year 7,152,219 15,949,466 Other comprehensive income for the year 11,812,000 7,511,000 Total comprehensive income for the year 18,964,219 23,460,466 General fund at the end of the year 221,720, ,756,064 The notes on pages 105 to 136 form part of these financial statements. 103

9 Consolidated statement of cash flows for the year ended 31 March 2018 (Expressed in Hong Kong dollars) Operating activities Note Surplus before tax for the year 7,192,022 16,061,220 Adjustments for: Interest income (3,838,998) (2,164,472) Depreciation 16,306,318 15,267,061 Loss on disposal of fixed assets 608 7,755 Realisation of deferred income - office premises (10,000,000) (10,000,000) Operating surplus before changes in working capital 9,659,950 19,171,564 Amount in defined benefit retirement plan asset recognised in the consolidated income statement 13(a)(v) 653,000 1,139,000 (Increase)/decrease in debtors, deposits and payments in advance (1,625,895) 2,677,526 Increase in receipts in advance, accounts payable and accruals 13,666,052 71,100,750 Cash generated from operation 22,353,107 94,088,840 Overseas tax (paid)/refunded (158,033) 1,293 Net cash generated from operating activities 22,195,074 94,090,133 Investing activities Interest received 3,168,863 1,743,208 Purchase of fixed assets (2,615,137) (3,324,753) Proceeds from disposal of fixed assets 2,257 - Increase in deposits with banks with maturity of more than 3 months (100,917,710) (51,210,721) Net cash used in investing activities (100,361,727) (52,792,266) Net (decrease)/increase in cash and cash equivalents (78,166,653) 41,297,867 Cash and cash equivalents at the beginning of the year ,232, ,934,361 Cash and cash equivalents at the end of the year ,065, ,232,228 The notes on pages 105 to 136 form part of these financial statements. 104

10 Notes to the financial statements (Expressed in Hong Kong dollars unless otherwise indicated) 1 Status of the Board The Hong Kong Tourism Board ( the Board ) is a subvented body corporate established in 1957 under the Hong Kong Tourist Association Ordinance and reconstituted under the Hong Kong Tourist Association (Amendment) Ordinance 2001 and the Hong Kong Tourism Board Ordinance. Its registered office and principal place of operation is 11th Floor, Citicorp Centre, 18 Whitfield Road, North Point, Hong Kong. The principal activities of the Board are to market and promote Hong Kong as a world-class tourist destination. 2 Significant accounting policies (a) Statement of compliance These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards ( HKFRSs ), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ( HKASs ) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ) and accounting principles generally accepted in Hong Kong. Significant accounting policies adopted by the Group are disclosed below. The HKICPA has issued certain new and revised HKFRSs that are first effective or available for early adoption for the current accounting period of the Group and the Board. Note 2(c) provides information on any changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior accounting periods reflected in these financial statements. (b) Basis of preparation of the financial statements The consolidated financial statements for the year ended 31 March 2018 comprise the Board and its subsidiary (together referred to as the Group ). The measurement basis used in the preparation of the financial statements is the historical cost basis. The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. 105

11 2 Significant accounting policies (continued) (c) Changes in accounting policies The HKICPA has issued a number of amendments to HKFRSs that are first effective for the current accounting period of the Group. However, none of these developments have had a material effect on how the Group s results and financial position for the current or prior periods have been prepared or presented. The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (note 18). (d) Films, publicity and advertising materials Films, publicity and advertising materials are charged to the income statement on purchase, and no account is taken of stocks on hand at the end of the reporting period. (e) Investment in a subsidiary A subsidiary is an entity controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights are considered. An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealised profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment. In the Board s statement of financial position, an investment in a subsidiary is stated at cost less impairment losses (see note 2(l)), unless the investment is classified as held for sale (or included in a disposal group that is classified as held for sale). (f) Fixed assets Fixed assets are stated in the statement of financial position at cost less accumulated depreciation and impairment losses (see note 2(l)). Gains or losses arising from the retirement or disposal of an item of fixed asset are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognised in the income statement on the date of retirement or disposal. 106

12 2 Significant accounting policies (continued) (g) Depreciation Depreciation is calculated to write off the cost of fixed assets, less their residual value, if any, using the straight-line method over their estimated useful lives as follows: Leasehold properties 25 years Leasehold improvements Over the shorter of the fixed lease term and 5 years Motor vehicles 4 years Furniture, fixtures and other equipment 3-5 years Computer hardware, software and system development 3 years Both the useful life of an asset and its residual value, if any, are reviewed annually. (h) Debtors, deposits and payments in advance Debtors, deposits and payments in advance are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method, less impairment losses for bad and doubtful debts, except where the effect of discounting would be immaterial. In such cases, the debtors, deposits and payments in advance are stated at cost less impairment losses for bad and doubtful debts. Impairment losses for bad and doubtful debts are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets) where the effect of discounting is material. Objective evidence of impairment includes observable data that comes to the attention of the Group about events that have an impact on the asset s estimated future cash flows such as significant financial difficulty of the debtors. Impairment losses for trade debtors included within debtors, deposits and payment in advance whose recovery is considered doubtful but not remote are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade debtors directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in the income statement. 107

13 2 Significant accounting policies (continued) (i) Accounts payable and accruals Accounts payable and accruals are initially recognised at fair value and subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost. (j) Cash and cash equivalents Cash and cash equivalents comprise cash at banks and in hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition. (k) Provisions and contingent liabilities Provisions are recognised for other liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. (l) Impairment of assets Internal and external sources of information are reviewed at the end of each reporting period to identify indications that fixed assets and investment in a subsidiary may be impaired or an impairment loss previously recognised no longer exists or may have decreased. If any such indication exists, the asset s recoverable amount is estimated. The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit). 108

14 2 Significant accounting policies (continued) (l) Impairment of assets (continued) An impairment loss is recognised in income statement if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units to reduce the carrying amount of the assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal (if measurable) or value in use (if determinable). An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. A reversal of impairment losses is limited to the asset s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised. (m) Income tax Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in the income statement except to the extent that they relate to items recognised in other comprehensive income or directly in equity, in which case the relevant amounts of tax are recognised in other comprehensive income or directly in equity, respectively. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits. Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised. The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of the reporting period. Deferred tax assets and liabilities are not discounted. 109

15 2 Significant accounting policies (continued) (n) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the income statement as follows: (i) (ii) (iii) (iv) (v) (vi) Government subvention to finance the general recurrent activities of the Group is recognised as revenue in the income statement of the year in respect of which it becomes receivable. Government subvention to finance Meetings, Incentives, Conventions and Exhibitions ( MICE ) bidding activities of the Group is recognised as revenue to the extent of the related expenditure incurred during the year, with the unutilised balance included in receipts in advance. Government subvention to finance the non-recurrent activities of the Group is recognised as revenue to the extent of the related expenditure incurred during the year, with the unutilised balance included in receipts in advance. Government subvention received for the purchase of office premises of the Group is included in the statement of financial position as deferred income and is credited to the income statement by instalments over the expected useful life of the related asset on a basis consistent with the depreciation policy (note 2(g)). Subscription fees are recognised on a time-apportioned basis. Interest income is recognised as it accrues using the effective interest method. (vii) Sponsorship income for the events is recognised in the income statement upon the completion date of the respective events. (viii) Promotion and advertising income are accounted for on the accrual basis. (o) Translation of foreign currencies Foreign currency transactions during the year are translated into Hong Kong dollars at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated into Hong Kong dollars at the foreign exchange rates ruling at the end of the reporting period. Exchange gains and losses are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was measured. 110

16 2 Significant accounting policies (continued) (p) Leased assets An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease. (i) Classification of assets leased to the Group Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, except where land is held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease. In such cases, it is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee, or at the date of construction of those buildings, if later. (ii) Operating lease charges Where the Group has the use of assets held under operating leases, payments made under the leases are charged to the income statement in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in the income statement as an integral part of the aggregate net lease payments made. (q) Employee benefits (i) (ii) (iii) Salaries, annual bonuses, annual leave, and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Group. The Group operates a defined benefit and a defined contribution staff retirement scheme for the Hong Kong office, and defined contribution staff retirement schemes for certain overseas offices. Contributions made under the schemes applicable to each year are charged to the income statement for the year. Contributions for the defined benefit scheme of the Hong Kong office are made in accordance with the recommendations made by the actuary. Assets of the schemes, are held separately from those of the Group. Contributions to Mandatory Provident Fund as required under the Hong Kong Mandatory Provident Fund Schemes Ordinance, are recognised as an expense in the income statement as incurred. 111

17 2 Significant accounting policies (continued) (q) Employee benefits (continued) (iv) The Group s net obligation in respect of defined benefit retirement plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value and the fair value of any plan assets is deducted. The calculation is performed by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. Service cost and net interest expenses (income) on the net defined benefit liability (asset) are recognised in the income statement as part of staff costs. Current service cost is measured as the increase in the present value of the defined benefit obligation resulting from employee service in the current period. When the benefits of a plan are changed, or when a plan is curtailed, the portion of the changed benefit related to past service by employees, or the gain or loss on curtailment, is recognised as an expense in the income statement at the earlier of when the plan amendment or curtailment occurs and when related restructuring costs or termination benefits are recognised. Net interest expense (income) for the period is determined by applying the discount rate used to measure the defined benefit obligation at the beginning of the reporting period of the net defined benefit liability (asset). The discount rate is the yield at the end of the reporting period on high quality corporate bonds that have maturity dates approximating the terms of the Group s obligations. Remeasurements arising from defined benefit retirement plan are recognised in the other comprehensive income and reflected immediately in general fund. Remeasurements comprise actuarial gains and losses, the return on plan assets (excluding amounts included in net interest on the net defined benefit liability (asset)) and any change in the effect of the asset ceiling (excluding amounts included in net interest on the net defined benefit liability (asset)). (v) Termination benefits are recognised at the earlier of when the Group can no longer withdraw the offer of those benefits and when it recognises restructuring costs involving the payment of termination benefits when, and only when, the Group demonstrably commits itself to terminate employment or to provide benefits as a result of voluntary redundancy by having a detailed formal plan which is without realistic possibility of withdrawal. 112

18 2 Significant accounting policies (continued) (r) Related parties (a) A person, or a close member of that person s family, is related to the Group if that person: (i) (ii) (iii) has control or joint control over the Group; has significant influence over the Group; or is a member of the key management personnel of the Group or the Group s parent. (b) An entity is related to the Group if any of the following conditions applies: (i) (ii) (iii) (iv) (v) (vi) The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). Both entities are joint ventures of the same third party. One entity is a joint venture of a third entity and the other entity is an associate of the third entity. The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group. The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the Group s parent. Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity. 113

19 3 Principal source of income The Group The principal source of income is the subvention from the Government of the Hong Kong Special Administrative Region ( Government ) for the year which is determined with regard to the needs of the Board as presented in its annual business plan of budget and proposed programme of activities. The amount of the subvention recognised as revenue during the year is analysed as follows: Recurrent Subvention for the year 631,664, ,060,299 Non-recurrent Meetings, Incentives, Conventions and Exhibitions Promotion/ Image Booster Campaign/Support Light Shows/Quality & Honest Promotion/Tencent Strategic Cooperation/Matching Fund for Overseas Tourism Promotion/Celebration of the 20th Anniversary of HKSAR/Quality Tourism Services Scheme/Waive the Local Traders Participation Fees for Overseas Promotion Fairs/Funding Support for Small & Medium-Sized MIC Groups/Fly-cruise Promotion/Participate in HKTDC s Overseas Promotion Events/Additional Manpower Resources for Taking Forward the Initiatives/Cruise Deployment Fund/Step up Promotion of Home-Grown Mega Events/Enhance Promotion and Contents of Mega Events/Support Events Driving High-yield Visitors for Overseas & Local Promotion/Pilot Scheme to Promote Green Tourism/Support Trade Partners in Developing Land Excursion Products for Cruise Passengers/Collaborate with Cruise Liners to open up more Source Markets/Step up Promotion of Hong Kong s Positive Image in the Mainland/Pilot Scheme to Provide Promotional Offers to Attract Transit Visitors/Administration Cost for Funding Schemes/Symphony of Lights Enhancement/e-Sport & Music Festival/New VIS Centre/District Promotion Revamp/Enhancing the Scale of HKTB s Mega Events and Promotion of Other Mega Events in Town/Production of Promotion Videos and Promotion Costs/ Launching a Retail Booster Campaign/Wine and Dine Festival/Great Outdoors Hong Kong 316,814, ,102, ,478, ,162,

20 4 Income tax Income tax in the consolidated income statement represents: Current tax - Overseas Provision for the year 39, ,754 No provision for Hong Kong Profits Tax has been made in the financial statements as the Board has been granted exemption from all Hong Kong taxes by the Inland Revenue Department under Section 87 of the Inland Revenue Ordinance. Taxation in respect of the Taiwan operation of HKTB Limited, a subsidiary of the Group, is charged at 17% of its estimated assessable profits (2017: 17%). 5 Surplus before tax for the year The Group (a) Staff costs Contributions to defined contribution retirement plan 10,347,881 9,953,839 Amounts recognised in respect of defined benefit retirement plan (note 13(a)(v)) 653,000 1,139,000 Retirement costs 11,000,881 11,092,839 Salaries and other benefits 244,253, ,629, ,254, ,722,438 (b) Other item Net foreign exchange loss 7,521, ,

21 6 Senior executives pay and allowances The Group The senior executives of the Group include the Executive Director, Deputy Executive Director, General Managers and Regional Directors, and their total pay and allowances during the year were as follows: 2018 Executive Director Other senior executives Total Basic salaries 4,547,000 23,904,000 28,451,000 Discretionary performance pay 748,000 2,273,000 3,021,000 Retirement benefit expenses, contract gratuities and other allowances 704,000 4,433,000 5,137,000 5,999,000 30,610,000 36,609, Executive Director Other senior executives Total Basic salaries 4,406,000 23,438,000 27,844,000 Discretionary performance pay 619,000 1,841,000 2,460,000 Retirement benefit expenses, contract gratuities and other allowances 701,000 4,228,000 4,929,000 5,726,000 29,507,000 35,233,

22 6 Senior executives pay and allowances (continued) The Group (continued) The salaries and discretionary performance pay (excluding retirement benefit expenses, contract gratuities and other allowances) for all senior executive positions of the Group fell within the following pay ranges: Pay ranges 2018 No. of senior executive positions 2017 No. of senior executive positions 1 - $500,001 to $1,000,000 (note (a)) $1,000,001 to $1,500,000 (note (a)(i) & (a)(ii)) $1,500,001 to $2,000,000 (note (a)(iii)) $2,000,001 to $2,500,000 (note (b)) $2,500,001 to $3,000,000 (note (b)) $3,000,001 to $3,500, $3,500,001 to $4,000, $4,000,001 to $4,500, $4,500,001 to $5,000, $5,000,001 to $5,500, (a) Senior executive position under Pay range 1 decreased by 1 due to the following movements: (i) (ii) (iii) one senior executive position moved from Pay range 1 to Pay range 2 due to higher in foreign exchange rate for Hong Kong Dollar equivalent; one senior executive position moved from Pay range 1 to Pay range 2 due to vacant position was filled in the first half of 2017/18; and one senior executive position moved from Pay range 3 to Pay range 1 due to the position being vacant in the second half of 2017/18. (b) Two senior executive positions moved from Pay range 4 to Pay range 5 due to annual salary increases. 117

23 6 Senior executives pay and allowances (continued) The Group (continued) During the year, the Chairman and members of the Board did not receive any remuneration for their services rendered to the Board. After deliberation and endorsement by the Staff and Finance Committee which comprises non-executive Board members and an officer of the Tourism Commission, the remuneration, terms and conditions of employment of the senior executives were approved by the Board. In accordance with the Hong Kong Tourism Board Ordinance, the appointment and terms and conditions of employment of the Executive Director and the Deputy Executive Director are subject to the approval of the Chief Executive of Hong Kong Special Administrative Region. The senior executives receive a basic salary and a performance-based variable pay. With effect from 2007/08, the performance evaluation of senior executives is determined by a Performance Management System and assessment criteria, including Key Performance Indicators, Goals and Competencies. Their performance is referenced against a set of objectives set out in the annual business plan. The performance of the Executive Director is assessed by the Chairman of the Board while the performance of the Deputy Executive Director, General Managers and Regional Directors are assessed by the Executive Director. The variable pay of all the senior executives is approved by the Remuneration Review Committee comprising the Chairman of the Board and the Staff and Finance Committee. The amount of discretionary performance pay for the Executive Director disclosed above represents the variable pay amount of $748,000 for the year ended 31 March 2018 (2017: $619,000). The remuneration of other senior executive positions for the year ended 31 March 2018 represents compensation for the Deputy Executive Director, seven General Manager positions (2017: seven General Manager positions) and five Regional Director positions (2017: five Regional Director positions). 118

24 7 Fixed assets (a) The Group Leasehold properties Leasehold improvements Motor vehicles Furniture, fixtures and other equipment Computer hardware, software and system development Work in progress Total Cost: At 1 April ,855,009 10,512, ,411 11,830,265 27,114, ,646,300 Additions - 1,018,256-1,363,858 1,912,380 2,240,471 6,534,965 Disposals (431,188) (1,293,263) - (1,724,451) At 31 March ,855,009 11,530, ,411 12,762,935 27,734,071 2,240, ,456,814 Accumulated depreciation: At 1 April ,940,903 8,215, ,411 10,303,874 19,251, ,045,413 Charge for the year 10,114, , ,800 4,590,879-16,306,318 Disposals (430,076) (1,291,510) - (1,721,586) At 31 March ,055,103 9,093, ,411 10,596,598 22,551, ,630,145 Net book value: At 31 March ,799,906 2,436,937-2,166,337 5,183,018 2,240,471 23,826,

25 7 Fixed assets (continued) (a) The Group (continued) Leasehold properties Leasehold improvements Motor vehicles Furniture, fixtures and other equipment Computer hardware, software and system development Work in progress Total Cost: At 1 April ,855,009 9,797, ,411 11,533,057 23,757, , ,185,224 Additions - 717, ,449 3,292,184-4,756,646 Transfer from work in progress ,160 (908,160) - Disposals - (2,087) - (450,241) (843,242) - (1,295,570) At 31 March ,855,009 10,512, ,411 11,830,265 27,114, ,646,300 Accumulated depreciation: At 1 April ,826,703 7,490, ,680 10,251,115 16,199, ,066,167 Charge for the year 10,114, ,135 34, ,210 3,892,785-15,267,061 Disposals - (2,087) - (445,451) (840,277) - (1,287,815) At 31 March ,940,903 8,215, ,411 10,303,874 19,251, ,045,413 Net book value: At 31 March ,914,106 2,297,120-1,526,391 7,863,270-33,600,887 Leasehold properties are all held on long term leases in Hong Kong. 120

26 7 Fixed assets (continued) (b) The Board Leasehold properties Leasehold improvements Motor vehicles Furniture, fixtures and other equipment Computer hardware, software and system development Work in progress Total Cost: At 1 April ,855,009 10,512, ,411 11,786,811 27,104, ,592,079 Additions - 1,018,256-1,356,574 1,912,380 2,240,471 6,527,681 Disposals (431,188) (1,293,263) - (1,724,451) At 31 March ,855,009 11,530, ,411 12,712,197 27,723,304 2,240, ,395,309 Accumulated depreciation: At 1 April ,940,903 8,215, ,411 10,276,634 19,243, ,009,732 Charge for the year 10,114, , ,512 4,588,553-16,294,704 Disposals (430,076) (1,291,510) - (1,721,586) At 31 March ,055,103 9,093, ,411 10,560,070 22,540, ,582,850 Net book value: At 31 March ,799,906 2,436,937-2,152,127 5,183,018 2,240,471 23,812,

27 7 Fixed assets (continued) (b) The Board (continued) Leasehold properties Leasehold improvements Motor vehicles Furniture, fixtures and other equipment Computer hardware, software and system development Work in progress Total Cost: At 1 April ,855,009 9,797, ,411 11,490,792 23,747, , ,132,192 Additions - 717, ,843 3,292,184-4,751,040 Transfer from work in progress ,160 (908,160) - Disposals - (2,087) - (445,824) (843,242) - (1,291,153) At 31 March ,855,009 10,512, ,411 11,786,811 27,104, ,592,079 Accumulated depreciation: At 1 April ,826,703 7,490, ,680 10,226,071 16,193, ,034,999 Charge for the year 10,114, ,135 34, ,597 3,890,468-15,258,131 Disposals - (2,087) - (441,034) (840,277) - (1,283,398) At 31 March ,940,903 8,215, ,411 10,276,634 19,243, ,009,732 Net book value: At 31 March ,914,106 2,297,120-1,510,177 7,860,944-33,582,347 Leasehold properties are all held on long term leases in Hong Kong. 122

28 8 Interests in a subsidiary and amount due to a subsidiary The Board Interests in a subsidiary Unlisted share, at cost 1 1 Capital contribution 31,527,724 31,527,724 Less: impairment loss (30,975,849) (30,975,849) 551, ,876 Amount due to a subsidiary 2,361,977 2,411,969 As at 31 March 2018, the Board assessed the interests in the subsidiary and no additional impairment loss was recognised during the year (2017: Nil). The amounts due to a subsidiary are unsecured, interest free and have no fixed terms of repayment. Details of the Board s wholly-owned subsidiary are set out below: Name of company Principal activities Place of incorporation HKTB Limited Marketing and promoting Hong Kong Hong Kong Auditor s remuneration and other operating expenses of $53,105 for the year ended 31 March 2018 (2017: $50,655) in respect of the subsidiary were borne by the Board which has waived its right of recovery thereof. 123

29 9 Debtors, deposits and payments in advance The Group The Board Debtors 2,679,227 2,596,578 2,679,227 2,596,578 Less: Provision for impairment loss of debtors (19,117) (19,117) (19,117) (19,117) 2,660,110 2,577,461 2,660,110 2,577,461 Deposits and payments in advance 19,385,882 17,172,501 18,955,324 16,550,426 22,045,992 19,749,962 21,615,434 19,127,887 Included in debtors, deposits and payments in advance are the following amounts denominated in major currencies other than the Group s and the Board s functional currency: Exposure to foreign currencies (expressed in Hong Kong dollars) The Group The Board Australian Dollars 451, , , ,874 Chinese Yuan 2,346, ,806 2,346, ,806 Euros 652, , , ,004 Great Britain Pounds 767,391 2,650, ,391 2,650,226 Japanese Yen 3,621,965 3,440,250 3,621,965 3,440,250 Korean Won 238, , , ,817 New Taiwan Dollars 430, , United States Dollars 291, , , ,252 The gross amount of debtors, deposits and payments in advance at 31 March 2018 that is expected to be recovered after more than one year for the Group is $4,297,584 and the Board is $4,069,544 (2017: the Group is $3,078,958 and the Board is $3,078,958). 124

30 9 Debtors, deposits and payments in advance (continued) (a) Impairment of debtors Impairment loss in respect of debtors are recorded using an allowance account unless the Board is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against debtors directly (see note 2(h)). The movement in the provision for impairment loss of debtors during the year is as follows: The Group The Board At 1 April 19,117 19,117 19,117 19,117 Impairment loss recognised At 31 March 19,117 19,117 19,117 19,117 At 31 March 2017 and 2018, provision for impairment loss of $19,117 was recognised for the Group and the Board. (b) Debtors that are not impaired The ageing analysis of debtors that are neither individually nor collectively considered to be impaired are as follows: The Group The Board Neither past due nor impaired 1,380, ,076 1,380, ,076 Less than 1 month past due 248,201 1,221, ,201 1,221,747 1 to 3 months past due 244, , , ,473 More than 3 months but less than 1 year past due 35, ,282 35, ,282 1 year or more than 1 year past due 751,237 88, ,237 88,883 1,279,569 2,090,385 1,279,569 2,090,385 2,660,110 2,577,461 2,660,110 2,577,